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Glossary of Financial Terms
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Actual Cash Value – In insurance, a term that indicates if your home is destroyed and you decide not to replace it, you will receive its replacement cost, minus depreciation.
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Adjustable Interest Rate – The interest rates of these loans rise as interest rates increase.
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Balloon Mortgage – Interest rates on these loans are very low for a short period of time. Payments typically cover interest only, leaving the principal owed in tact.
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Fixed Interest Rate – The interest rates with these loans are locked in when the mortgage is drawn up.
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Government-backed Loans – Agencies such as the Federal Housing Association (FHA) offer loans with reduced interest or lower down payments to qualified buyers.
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Interest Only Loans – Borrowers only pay interest on the loan for the first five to ten years, after which they have 20–25 years to pay off the principal plus interest.
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Liability – In real estate, a term that indicates the seller’s responsibilities and obligations. In insurance, a term that covers homeowners should other persons get injured on their property.
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Mortgage Term – The length of your mortgage.
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Replacement Cost – In insurance, a term that indicates if your home is destroyed, you will receive money to replace it only to the maximum of your coverage.
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